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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The sum of consumer surplus and producer surplus






2. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






3. The marginal utility from consumption of more and more of that item falls over time






4. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






5. The most desirable alternative given up as the result of a decision






6. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






7. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






8. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






9. The rational decision maker chooses an action if MB = MC






10. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






11. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






12. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






13. Costs that change with the level of output. If output is zero - so are TVCs.






14. TR = P * Qd






15. The practice of selling essentially the same good to different groups of consumers at different prices






16. Ei = (%dQd good X)/(%d Income)






17. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






18. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






19. Two goods are consumer substitutes if they provide essentially the same utility to consumers






20. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






21. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






22. MUx / Px = MUy/Py or MUx/MUy = Px/Py






23. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






24. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






25. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






26. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






27. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






28. Ei > 1






29. A good for which higher income decreases demand






30. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






31. Entry of new firms shifts the cost curves for all firms upward






32. Total product divided by labor employed. APL = TPL/L






33. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






34. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






35. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






36. The ability to set the price above the perfectly competitive level






37. The total quantity - or total output of a good produced at each quantity of labor employed






38. Entry (or exit) of firms does not shift the cost curves of firms in the industry






39. When firms focus their resources on production of goods for which they have comparative advantage






40. Entry of new firms shifts the cost curves for all firms downward






41. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






42. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






43. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






44. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






45. Ed > 1 - meaning consumers are price sensitive






46. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






47. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






48. Ed < 1






49. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






50. The change in quantity demanded resulting from a change in the price of one good relative to other goods